Bowoon Sangsa Company Ltd v Micronesian Industrial Corporation

• Date: 09 March 1982
• Court: U.S. Court of Appeals — Ninth Circuit

United States Court of Appeals, Ninth Circuit.

(Haynsworth, Trask and Wallace, Circuit Judges)

Bowoon Sangsa Co Ltd

and

Micronesian Industrial Corporation

Jurisdiction Executive Court order Injunction granted by United States District Court Whether court in Palau required to honour injunction Admiralty action Limitation proceedings

States Trust territory Micronesia Palau Whether independent of the United States Whether Palauan court a foreign court for purposes of United States law The law of the United States

Summary: The facts:The appellant, a Korean corporation, had loaded onto its vessel in the harbour of Palau1 coconut oil belonging to the appellee, a Micronesian corporation. The ship subsequently ran aground and over half of the shipment of coconut oil was jettisoned. The appellee filed suit for the loss of its cargo in the Trial Division of the High Court of the Trust Territory, Palau District. Six months later the appellant filed a petition in the United States District Court in Guam for limitation of liability pursuant to a United States limitation statute. The District Court dismissed the petition on the ground that it was not a proper venue for the petition. The appellant appealed against the District Court's dismissal.

Held (Circuit Judge Trask dissenting):The judgment of the District Court was reversed.

(1) Where a ship had been lost or was in a foreign country and no action had been commenced or attachment made in any United States district, a petition for limitation might be filed in any United States district. As the appellant's vessel was in Korea and no action had been filed in any United States district, the District Court in Guam was a proper venue for the appellant's petition (pp. 5578).

(2) Limitation judgments, being of a procedural rather than a substantive nature, did not have extraterritorial effect and claimants who abstained from filing claims for damages in the United States courts were free to pursue actions in foreign tribunals (pp. 5589).

(3) Although Palau was moving towards independence, it was still dominated by the United States and could not be considered a foreign country. The Palauan courts were not independent foreign courts and were therefore obliged to honour an injunction granted by a United States District Court in limitation proceedings (pp. 55962).

Per Circuit Judge Trask, dissenting: The majority's emphasis on the political status of Palau was misplaced. The Palauan High court was indeed the court of a foreign country and was therefore not obliged, unless so required in accordance with the law of Palau, to honour an injunction from a United States District Court (pp. 5634).

The following is the text of the judgment of the Court:

WALLACE, Circuit Judge:

Appellant Bowoon Sangsa Co. (Bowoon) is a Korean corporation with its principal place of business in Seoul, Korea. Appellee Micronesian Industrial Corp. (MIC) is incorporated under the laws of the Trust Territory of the Pacific Islands and conducts business in Palau. Coconut oil belonging to MIC was loaded onto Bowoon's vessel in Koror, Palau, for shipment to ports in California. While leaving the harbor, the ship grounded on a reef. In order to free the vessel, the Master jettisoned approximately 1,530 metric tons of coconut oilover one-half of the shipment. After she was refloated, the ship proceeded to Korea for repairs.

MIC immediately filed suit for the loss of its cargo in the Trial Division of the High Court of the Trust Territory, Palau District. Six months later, Bowoon filed a petition in the District of Guam for limitation of liability pursuant to 46 U.S.C. 183(a), 185. The district court issued a temporary restraining order against the commencement or continued prosecution of any actions against Bowoon resulting from the grounding of its ship. MIC moved for modification of the restraining order to allow it to continue with the suit filed earlier against Bowoon in Palau. After examining the geographic relationship of the parties, as well as the location of the accident and the vessel, the court indicated the claims resulting from the grounding of the Bowoon ship were not within the jurisdiction of any United States judicial district. Consequently, Bowoon's limitation petition was dismissed for lack of venue and failure to state a claim for limitation of damages. MIC's suit against Bowoon was subsequently transferred from the Trust Territory High Court to the Supreme Court of the Republic of Palau, where it is now pending.

We conclude that the district court misinterpreted the venue rules relating to limitation complaints, and erred in refusing to enjoin MIC's lawsuit pending before the court in Palau. We therefore reverse the judgment of the district court.

I

As a threshold question we must determine if the district court order is reviewable. The denial, modification, or dissolution of an injunction in a limitation proceeding is appealable as a matter of right under 28 U.S.C. 1292(a)(1). Complaint of Mucho Kay, Inc.ECAS, 578 F.2d 1156, 1157 (5th Cir.1978). Here, however, Bowoon appeals from the dissolution of a temporary restraining order, a decision that ordinarily is not appealable under section 1292(a)(1). Sohappy v. Smith, 529 F.2d 570, 572 (9th Cir.1976) (per curiam). The question, therefore, is whether the temporary restraining order in this case may be characterized as a preliminary injunction for purposes of appeal under section 1292(a)(1).

Courts examine the effect of an interlocutory order rather than its terminology in determining reviewability under 28 U.S.C. 1292(a)(1). E.g., Sampson v. MurrayUNK, 415 U.S. 61, 8687, 94 S.Ct. 937, 951, 39 L.Ed.2d 166 (1974); Tagupa v. East-West Center, Inc.ECAS, 642 F.2d 1127, 1129 (9th Cir. 1980); Hotel & Restaurant Employees and Bartenders International Union v. RollisonENR, 615 F.2d 788, 793 n. 15 (9th Cir.1980). The two factors generally considered determinative are: (1) whether the order extends beyond the twenty-day limit established by Federal Rule of Civil Procedure 65; and (2) whether the district court's decision was preceded by notice and an adversary hearing. Sampson v. MurrayUNK, 415 U.S. at 8687 & n. 58, 94 S.Ct. at 951 & n. 58; Lewis v. S.S. BauneECAS, 534 F.2d 1115, 1121 (5th Cir. 1976); 16 C. Wright, A. Miller, E. Cooper & E. Gressman, Federal Practice and Procedure, 3922, at 3236 (1977).

Here, both factors are present. The order continued in effect for approximately four months. The parties received a substantial adversary hearing on the motion for modification of the restraining order. We conclude that for purposes of section 1292(a)(1) the order appealed from was a preliminary injunction, and we therefore have jurisdiction to consider Bowoon's appeal.1

II

We turn next to the issue of venue. A complaint for limitation pursuant to the Limitation of Liability Act, ch. 43, 9 Stat. 635 (1851) (codified as amended at 46 U.S.C. 181189) (the Act), permits a vessel owner to limit its liability for damage or loss arising out of a particular voyage to the value of the vessel plus pending freight charges (compensation for the carriage of goods) at the termination of the voyage.2See, e.g., Black Diamond Steamship Corp. v. Robert Stewart & Sons, Ltd. (The Norwalk Victory),[2] 336 U.S. 386, 69 S.Ct. 622, 93 L.Ed. 754 (1949). The Act permits both American and foreign shipowners facing multiple suits arising out of one voyage to bring the claimants into one proceeding to apportion the owner's liability. Provided their lawsuits are subject to the orders of a district court, all damage claimants may be enjoined from maintaining separate suits and required instead to file their claims in the limitation proceeding. Jung Hyun Sook v. Great Pacific Shipping Co.,

632 F.2d 100, 103 (the Cir.1980).

We find that the district court erred in its interpretation of the rule governing venue of limitation petitions. Under rule F(9) of the Supplemental Rules for Certain Admiralty and Maritime Claims,3 if a ship has been lost or is in a foreign country and no suit has been commenced nor attachment made in any district, the complaint may be filed in any district. Venue for Bowoon's petition is proper in the Guam district court under this provision because Bowoon's vessel is in Korea and no damage suits have been filed nor attachments made in any United States district. We find that the court erred in holding that venue was improper in Guam.

III

MIC argues that even if the district court erred in dismissing the case on venue grounds, its decision may be sustained on an alternative ground. MIC claims that an order from the district court cannot restrain the proceedings in Palau because the courts of Palau are independent foreign courts. Bowoon responds that the Trust Territory is not a foreign jurisdiction for purposes of limitation of damages in admiralty cases.4 The district judge recognized this issue, but because he decided the case on venue grounds he was not required to pass on it. To resolve this question we must review not only legal precedent on the effect of limitation proceedings, but also the recent history of Palau and its judicial institutions.

A.

The nature and effect of limitation proceedings were first explored by the Supreme Court in Oceanic Steam Navigation Co. v. Mellor (The Titanic)UNKUNK, 233 U.S. 718, 34 S.Ct. 754, 58 L.Ed. 1171 (1914). There, the owner of the British flagship Titanic filed a...